LEGISLATIVE COUNSEL'S DIGEST


AB 260, as amended, Lieu. Lending.
(1) The Real Estate Law provides for the licensure and regulation
of real estate brokers and salespersons by the Real Estate
Commissioner. Existing law authorizes the commissioner to suspend or
revoke the license of a real estate licensee or corporation, or to
deny the issuance of a license to an applicant or corporation, for
specified violations.
This bill would further authorize the commissioner to suspend or
revoke those licenses, or to deny issuance of those licenses, upon a
violation of specified federal lending laws or regulations or
upon the violation or failure to comply with specified provisions of
state law relating to mortgages .
(2) Existing law imposes certain limitations and prohibitions on
licensed persons, as defined, with respect to the making of a covered
loan, defined as a consumer loan in which the original principal
balance of the loan does not exceed the most current conforming loan
limit for a single-family first mortgage loan established by the
Federal National Mortgage Association in the case of a mortgage or
deed of trust, and as specified. Existing law does not regulate or
define the term "higher-priced mortgage loan."
This bill would establish "higher-priced mortgage loans," as
defined, as a new category of regulated loans. The bill would, among
other things, limit prepayment penalties and prohibit provisions for
negative amortization. The bill would prohibit a licensed person, as
defined, from making false, deceptive, or misleading statements or
representations in connection with higher-priced mortgage loans. The
bill would also, among other things, prohibit a mortgage broker, as
defined, who arranges higher-priced mortgage loans with prepayment
penalties from receiving a compensation that exceeds certain amounts.
The bill would provide that a violation of the provisions regulating
higher-priced mortgage loans by a licensed person is also a
violation of the person's licensing law. The bill would authorize a
licensing agency or the Attorney General to enforce the provisions
regulating higher-priced mortgage loans. The bill would authorize
civil penalties in an amount up to $10,000 against a licensed person
who willfully and knowingly violates the provisions regulating
higher-priced mortgage loans, and would nullify prepayment penalties
or yield spread premiums that violate these provisions. The bill
would also establish specified duties for mortgage brokers performing
mortgage brokerage services for higher-priced mortgage loans. The
bill's provisions would apply to higher-priced mortgage loans
originated on or after July 1, 2010.
(3) Existing law imposes certain limitations and prohibitions on
specified licensees, including commercial banks, credit unions,
finance lenders, and residential mortgage lenders, with respect to
the making of consumer loans.
This bill would provide that a violation of specified federal
lending laws or regulations by those licensees is also a violation of
the licensing law of the licensee.
The bill would also provide that a mortgage broker, as defined,
providing mortgage brokerage services, as defined, to a borrower is
the fiduciary of the borrower, and any violation of the broker's
fiduciary duties is a violation of the mortgage broker's licensing
law and specified civil penalty and liability provisions. The bill
would further provide that this fiduciary duty includes a requirement
that the mortgage broker place the economic interest of the borrower
ahead of his or her own economic interest.
(4) Because a violation of the bill's provisions by certain
licensees may be punished as crimes under the licensing law of the
licensees, the bill would impose a state-mandated local program.
The California Constitution requires the state to reimburse local
agencies and school districts for certain costs mandated by the
state. Statutory provisions establish procedures for making that
reimbursement.
This bill would provide that no reimbursement is required by this
act for a specified reason.

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Comments/questions on AB 260 (Bass and Lieu and Nava): Lending.